If you can’t beat ’em, join ’em. That seems to be the attitude of electric utilities these days, as growing numbers of large energy users negotiate agreements to buy electricity directly from new wind and solar developments. Utilities in some states have begun offering their own renewable-energy rates—called “green tariffs”—to corporate buyers, guaranteeing renewable supplies through long-term contracts, in response to a trend that is increasingly driven as much by economics as by those companies’ sustainability goals.
Corporations such as Amazon, Apple and Google started turning to direct deals with wind and solar developers earlier this decade. Google, for example, signed its first power purchase agreement (PPA) in 2010 with an Iowa wind-farm developer. These agreements, most often covering the output of new solar and wind facilities, establish pricing for the purchase of a set amount of electricity over a term than can be as long as 20 years. In addition to supporting the expansion of renewable energy—most are with developers of new, rather than existing, projects—these deals also give the buyers an assurance of steady energy pricing over the contract’s duration.
“As the cost of renewables has fallen through the floor, it really becomes a triple bottom-line conversation,” said Letha Tawney, director of utility innovation for the World Resources Institute, one of four nonprofits leading the Renewable Energy Buyers Alliance (REBA).
Two of these bottom lines—lower-cost electricity and stable, long-term pricing—represent traditional business targets. But the third, a demonstration of corporate citizenship, is becoming a more important brand differentiator, especially as tech leaders seek to set themselves apart among potential new employees.
As interest in renewable PPAs has grown, a number of nonprofits have stepped up to encourage even greater expansion of the process. REBA formed last year to bring together the efforts of the Rocky Mountain Institute’s Business Renewables Center, Business for Social Responsibility and the World Wildlife Fund to help streamline the corporate renewable-energy purchasing process. Recently, this group has seen greater interest from utilities in participating in this business, especially in states with regulated electricity markets, where utilities hold a monopoly over all generation and sales. In these states, green tariffs are essentially PPAs signed with the utility, and they are helping to spur new renewables development in those regions.
A new green tariff developed in wind-rich Nebraska by the Omaha Public Power District (OPPD) was intended to support a new 970,000-square-foot Facebook data center in Sarpy County. The company is working toward a goal with its data centers of 50 percent renewable energy in its electricity-supply mix by 2018, so availability of wind and solar resources has become critical in its siting decisions for new facilities. Facebook said the new data center’s electricity will be purchased through OPPD from a new wind farm in the area.
Like a number of the new green tariffs across the country, this rate plan was designed specifically with Facebook’s needs in mind. Provisions requiring a minimum demand of 20 megawatts and a customer-owned substation fit plans already in mind for the Papillon, Neb., data center. That doesn’t mean other large-demand customers aren’t taking notice. Yahoo, which maintains its own data center in the same service territory, also is interested in adopting the rate structure as it expands.
Key to any of these agreements, Tawney said, is ensuring costs don’t get shifted to other utility customers. That’s one reason why Yahoo’s ability to access the OPPD’s green tariff would depend on an expansion that added new electrical loads. Shifting current demand from one of the utility’s existing generating stations to a new wind farm could leave other customers picking up the expense of carrying an underused asset.
REBA is working with states to develop options for customers whose large electrical demand is spread across multiple facilities, so those companies can subscribe to a portion of the output of a new renewable-energy-plant. Puget Sound Energy has developed a program in Washington state, called “Green Direct,” and it has already signed up Starbucks, REI and Target as participants. The plan is similar to much smaller-scale community-solar installations in the way that utilities pool subscribers’ payments to fund development of new renewable generation. With contract terms ranging from 15 to 20 years, developers are assured a reasonable return on their investments over the course of a wind or solar farm’s anticipated lifespan.
“It’s very much in a utility’s wheelhouse to do things like this,” Tawney said. “There is real interest in aggregated products, whether it’s through a utility or a third-party provider.”
While these new rate structures are focused on offering companies access to renewably sourced electricity, Tawney also sees them as templates for utilities seeking to evolve into a new kind of service provider. For example, in the future, companies also might seek to partner with their electricity supplier for new ways to gain access to charging networks for electric-vehicle fleets.